What happened last month in P2P finance and crowdfunding? Which platforms are on the rise, and which ones are falling behind? How has the sector performed over the last 12 months? We take a look at numbers reported to P2PMarketData in May 2021 and dive deeper into this month’s special focus: the dynamics between traditional and alternative finance.
About the monthly report
In the Monthly Funding Report, we track the funding amounts of real estate crowdfunding, peer-to-peer & online marketplace lending platforms. Please note that:
- The statistics exclude some prominent platforms such as Lending Club, Funding Circle, Credimi and Prosper, which do not accept individual investors and remain open only for institutional and corporate investors.
- None of the numbers cited is an estimation – the amounts are reported directly to us or pulled from the platforms’ publicly available loan books and statistic pages.
- We convert all amounts to EUR for comparison reasons, using exchange rates from the last day of the month.
- Historical funding volumes reported below may divert slightly from volumes calculated in previous reports due to exchange rate fluctuations and the changes in the pool of platforms we track.
We currently track data from 77 participating platforms, including originations operating in 27 markets and with 12 different currencies. In May 2021, we went through a major clean-up to increase the validity of our dataset and to be able to deliver the data to the users timely. We, therefore, delisted several platforms that either stopped sharing monthly funding volumes publicly or didn’t follow our minimum requirements for reliability and accuracy of the data and/or timely reporting. These platforms are TFGCrowd, Wisefund, The Many, EthicHub, Lendino, Lendy and RateSetter.
Key highlights: What happened in P2P finance last month?
We recorded a total funding volume of €434.5m in May 2021. Looking at the main currencies, the eurozone was the main growth area, while funding in GBP increased only slightly compared to a month ago and funding in other currencies decreased, mostly due to the decreased performance of the Swiss market leader CreditGate24. Marketplaces for loan originators and real estate lending performed the best when it comes to investment type preferences in May.
Chart 1. Funding volumes by currency and funding type (€ million)
We reported several noteworthy milestones reached last month:
- Spanish business lending platform Colectual has crossed the €10m total funding barrier;
- Income Marketplace – an Estonian marketplace lending site and one of the newest additions to our dataset, has broken above the €1m threshold;
- The Dutch social lending platform Lendahand has funded over €75m worth of projects in developing countries; and
- A British real estate lending platform Loanpad has funded over £50m since its launch (approx. €58m).
Looking at a longer-term, total monthly funding volumes rebounded after a slight dip in April 2021 and continued a modest but stable recovery after touching the bottom last spring.
Chart 2. Funding volumes over the last 12 months (€ million)
Big player ranking
Mintos remains far ahead of the competition, covering almost a third of the total funding volume in May among the platforms we track. Italian Borsa del Credito financed significantly more loans than last month, reaching the top three. The largest Swiss business lending platform CreditGate24, on the other hand, noted a much lower volume, dropping from the sixth to the sixteenth highest-volume platform in May 2021.
Chart 3. Platforms with the highest funding volumes in May 2021 (€ million)
Rising star ranking
Here, you can see the 10 platforms that have grown the most over the past 12 months. The Irish marketplace Lendermarket remains at the top of the list, followed by the US-based crypto lending platform MyConstant. MyConstant’s growth has, however, slowed down significantly, which probably has something to do with the recent corrections on main cryptocurrencies. We wrote about the cryptocurrency craze in our last month’s report. The real estate peer-to-peer market has been growing strong and fast, with half of the “rising stars” being real estate lending platforms.
Chart 4. Fastest growing platforms in the last 12 months (%)*
Below, we show the reverse of the rising star ranking – the 10 platforms that have noted the slowest growth in the last year. It hasn’t changed much – US-based real estate lending platform Sharestates tops the list – after an impressive growth between 2015 and 2019, their volumes pretty much stalled. DoFinance – second in the ranking, experienced serious issues during the COVID turmoil – we wrote about underperforming platforms in the February report. The remainder of the list includes a mix of different investment types, currencies and markets, so no clear patterns emerge.
Chart 5. Slowest growing platforms in the last 12 months (%)*
A deep dive: Is peer-to-peer banking the future?
RateSetter is one of the platforms we had to delist from our database this month. They stopped accepting new retail investors and sharing their data, following the acquisition of RateSetter by Metro Bank completed in April. This isn’t the first and only case like this – in March, Zopa withdrew from the database, citing higher sensitivity to what information they can share as a bank, which they have recently become.
Of course, the issue is not just our data – the dynamics between the banking system (and broader the financial system) and the P2P space has always been a matter of debate and speculation about future developments. Three main scenarios can be drawn:
- P2P lending platforms compete with banks for borrowers.
- P2P lending complements banks – it appeals to firms and individuals who cannot or do not want to use the bank offers.
- P2P lending converges with the banking system through stricter and increasingly unified regulation, mergers and acquisitions, etc.
Ultimately, all three scenarios are true to an extent. Some companies (especially real estate developers) would surely be eligible for a bank loan but choose to crowdfund for the sake of, for example, better interest rates or easier and quicker processes.
It is, however, also true that P2P lending caters to individuals and SMEs who wouldn’t be able to otherwise obtain a loan. The complementarity of P2P and banking offers is more and more often realised and leads to partnerships between providers. For example, we wrote about EstateGuru’s collaboration with LHV Bank and LandlordInvest’s co-financing project with the United Trust Bank – we also highlighted the increasing trend of between-platform partnerships in our last newsletter – subscribe here if you want to hear more in-depth news like this. This broad tendency also triggers relevant policy responses – the EU, for instance, is considering setting up a referral scheme to require banks to direct SMEs whose funding application they have turned down to providers of alternative funding.
Finally, the third scenario has also gained pace recently, especially in the most mature market – the UK. The “big three” of British peer-to-peer lending have been either acquired by a bank (RateSetter), have obtained a banking license themselves (Zopa) or closed their doors to retail investors and are instead focusing on institutional players such as investment and pension funds. Similar attempts have been seen in the US, where LendingClub has been preparing to launch its digital bank, and even in Europe, with Estonia-based Fagura soon to become a digital bank too.
Is this the future for European and global peer-to-peer lending? There is a broad trend towards tighter regulation and “formalisation” of the sector. But it doesn’t necessarily mean that P2P lending platforms will disappear – they do, at the end of the day, provide competitive offers, new technology, cost-efficient business models and new modes of delivery that banks often lack or are slow to implement. Ultimately, a mix of both worlds would probably be the ideal scenario.